ECONOMYNEXT – Sri Lanka’s capital market regulator has approved the creation of a separate listing board and listing rules at the Colombo Stock Exchange (CSE) for state-owned enterprises’ (SOEs) expected entry into the bourse.
The salient features of the rules applicable to the new Board include a stated capital of not less that 250 million rupees revenue, net asset and market capitalization tests, minimum 3 years operating history, time–bound requirements for financial reporting, and a minimum 10 percent public float with 300 public shareholder requirement.
“These rules were developed under the guidance and direction provided by the SEC to the CSE, and include consultations with, and inputs by, the SOE Restructuring Unit of the Government and the Auditor General,” the Securities and Exchange Commission of Sri Lanka (SEC) said in a statement.
The SEC said this was in response to a government policy to expedite reforms in SOEs.
The government, in a drive to raise revenue and reduce expenditure, is seeking to improve SOEs’ governance, efficiency, productivity and profitability.
“The aim of the policy is to make them market-oriented,” Minister Bandula Gunawardana told reporters previously.
Generally, companies listed on the stock exchange have better financial accountability as they are answerable to investors. Listing also ensures effective monitoring of compliance of the issuer.
“If you take a listed company with 1,000 shareholders, these entities are compelled to publish quarterly and annual accounts,” Sri Lanka State Enterprise Restructuring Unit, Director General Suresh Shah told a forum organized by the Asian Development Bank, earlier this month.
“SOEs have 22 million shareholders but do not have to give quarterly as well as annual accounts,” Shah pointed out.
Most Sri Lankan SOEs, which are reporting losses, have traditionally relied on government funding and borrowings to function.
The corporate governance requirements under the new SEC rules will be the same as those applicable to the Main Board and Diri Savi Board with a view to aligning the internal governance structures and processes of listed SOEs with the standards set in the market.
“The dismal performance of many SOEs in Sri Lanka have become a heavy fiscal burden upon the country with significant macroeconomic implications,” the SEC said.
“The SEC and the CSE have given due consideration to the current levels of governance, organization structure and operational challenges prevailing in the SOE sector and have therefore created a separate Listing Board and Listing rules with a view to enabling SOEs to progressively transition from what they are now to what they should be,” the SEC said.
“Any SOE that meets the Listing criteria of the Main Board or the Diri Savi Board can straightaway list on those Boards,” Tushara Jayaratne, Deputy Director General, SEC said. (Colombo/Sep13/2023)